Probability weighting in different domains: the role of stakes, fungibility, and affect

Michal Krawczyk

No 2014-15, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: This paper reports the results of a laboratory experiment in which probability weighting functions for risky gains were elicited non-parametrically in over 500 incentivized subjects. I compare probability weights for monetary rewards to two less fungible domains involving vouchers for different types of consumption, inducing stronger or weaker (positive) emotions. The level of stakes was also manipulated. I find that the probability to win monetary rewards is weighted almost linearly in the high stakes condition, the probability to win vouchers associated with positive affect is underweighted and the probability to win affect-poor vouchers is strongly underweighted. Substantial underweighting also prevails in all three domains in the low stakes condition.

Keywords: prospect theory; probability weighting functions; fungibility; affect (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014
New Economics Papers: this item is included in nep-exp, nep-neu and nep-upt
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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP132.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2014-15

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